FOREIGN EXCHANGE

QUESTION On 1 January 20X6 Wilkie Co, a company that uses the dollar ($) as its functional currency, buys goods from an overseas supplier, who uses Dinar (D) as its functional currency. The goods are priced at D35,000. Payment is still outstanding at the reporting date of 31 March 20X6. The prevailing exchange rates are: 1 January 20X6 D1.75 : $1 31 March 20X6 D1.90 : $1 ANSWER Initial transaction Translate at historic rate on 1 January 20X6, D35,000/1.75 = $20,000 Dr Purchases $20,000 Cr Payables $20,000 At the reporting date Payables are monetary items, so retranslate at the closing rate on 31 March 20X6, reducing the payables balance to D35,000/1.90 = $18,421 and recognising a gain of $1,579 ($20,000 – $18,421) in the SPL. Dr Payables $1,579 Cr SPL Exchange gain $1,579 DOUBT - In the above solution we have recored the payables at the closing rate and gain of 1579 is recorded and trasferred to PNL is isn't this treatment wrong since the gain is unrealized it should be transferred to OCI and not to PNL ??